This post is a bit personal, but it is close to my heart. Whether you like it or not, finances touch most every aspect of our lives.
We have been completely debt-free, house and all, for a couple of years now. I say that to show that getting out of debt is possible, not to brag. Trust me, I have made plenty of bad financial mistakes in the past. I once bought a new snowmobile with nothing down. I racked up student loans while at the same time, purchased a big screen television I couldn't afford. I bought my first vehicle on credit. Like me, there are sure to be financial decisions in the past that you have made and regret. The question is, did you learn anything from those unwise decisions as a result and make any necessary corrections. Further more, what are your financial goals?
Being burdened by debt, a slave to a monthly credit card bill or car payment, are paths I will never visit again. While our house and, really, our whole farm remodel is currently consuming much our monthly budget, continuing that is all completely optional. It is an extremely comforting fact to know that we could exist on an extremely small monthly income if needed.
Most people are a bit afraid to open up their personal finances, for reasons good or bad. I want to open up part of our finances to you today (be it the millennial in me or the supporter of open source and free ideas). These line items come right out of our March budget. YES, you should have a budget, no matter your income level! I encourage you to take time to compare these numbers against your own. I will take a little time to explain each as I go through the list. If you see something I could improve or just plain have an awesome recommendation, I am always open to constructive criticism and potential savings!!
These line items are not listed in order of importance, so please don't read between the lines! Note that we do not detail some categories, but keep it somewhat abstract. If the budget gets too complicated, it becomes too hard to follow, so we follow the K.I.S.S. rule.
Here it is:
Phone/Internet: $30/month We recently did some shopping around and arrived at Cricket Wireless as our cell phone service provider. We were previously with Straightalk at $45/month, which we thought was a pretty good deal. We have tried other plans like MintSim and immediately ruled them out as the service we received at our house (or really anywhere for that matter) was terrible! We also recently canceled our Internet service with the government sanctioned local monopoly. This resulted in a savings of around $1,000/year and much more peace, rest, and productive time at home. Image that! Hard to initiate, but extremely freeing!
Electric: $60-150/month This category is one that varies a bit. Before moving onto our farm, this monthly expense was typically closer to the $40-60. Running the well, animal water heaters and lamps adds up. We are currently working on reducing this line item as much as we comfortably can and then we will completely phase it out over the next few years as we take our power system off-grid. For now, we have switched to all LED lighting and added occupancy sensors throughout our house.
Property Taxes: $75/month No way around this in Minnesota, consistently in the top 20 (if not 15) most taxed states in the country. Reference: https://taxfoundation.org
Property Insurance: $78/month I should probably shop around, but it does seem that fewer companies are willing to insure older dwellings.
Auto Insurance: $32/month This is for liability only on two paid-for vehicles. If something happens to one of our vehicles that the other parties insurance won't cover, that is what our emergency fund is for.
Life Insurance: $56/month A little steep, but I want my family covered if something happens.
Tabs / License: $11/month
Propane: - We now burn wood as our main heat source. Roughly, it takes about $20/year in fuel/oil to run my chainsaw and splitter.
Medical/Dental: Covered by employer
Auto / Fuel: $230/month This month, this line item includes a new pair of cycling shorts (because Spring is coming, right!?) and currently extra fuel for winter driving as commuting by bike in the winter gets extremely difficult. It is closer to $150 in the summer. As we live in a rural setting, we have to travel to get anywhere. I would expect this to be much lower for someone living in an urban setting. Yes, I include my cycling expenses in this line item, as 95% of my cycling is done to commute to/from the office.
Education: $125/month (with a bit more for school supplies around August) This covers our children's tuition and books. Image how much lower my taxes would be if the government school system took note!
Farm / Feed: $100/month This number includes only our fixed costs. There are plenty of other infrastructure costs that come up through the year that are not calculated into this number. This number is offset a bit by the sale of farm produce. For sake of simplicity, we won't go any deeper here!
Groceries / Household: Beside "Phone/Internet", this is a line item we have recently overhauled. We were previously spending around $800/month, a number that typically drops a little in the summer as the garden start producing. But, after putting together some spreadsheets for price comparisons, we started traveling once a month to Fargo to make bulk purchases at Sam's Club and Aldi. Let's just say, the initial calculations look like we will shave around $1500-2000/year off of this category, including the cost of fuel and the price of the Sam's club annual membership fee! This podcast by Joshua Sheats really hit this point hard and motivated me: https://radicalpersonalfinance.com/how-to-build-and-use-a-price-book-to-save-money-in-the-short-and-long-term-and-to-train-your-frugal-muscles-for-massive-lifetime-wealth/
New Car Fund: Varies from month-to-month, depending on income. This is money we set aside each month to save up for a future vehicle to replace our current one. Financing? No thanks! I'll take patience and self control.
Equipment Fund: Varies from month-to-month, depending on income. This is money we set aside each month for miscellaneous large equipment purchases. A tractor? Yes, but be patient, putting it on credit is not an option I placed on the table.
Savings: Varies from month-to-month, depending on income. This is money we set aside for investing or emergencies.
Tithe/Giving: This is money we give to our local Church or other organizations that make a positive difference in people's lives (and that bring the Father to the fatherless.. Psalm 68:5) Here's a personal suggestion: http://newhopeuganda.org/
Clothing: We haven't collected enough yak fiber from our yak to make our own yet :P
Misc/House Remodel: Varies from month-to-month, depending on income and projects. This is by far our biggest line item at the moment. Some day soon, that will change.
Gifts: Birthdays and random acts of kindness. Whatever we don't spend for the month goes into savings for Christmas presents (a western tradition I am growing increasingly less fond of, but I'll allow the preference of the rest of my family to trump my own here).
Did you notice, no credit card, mortgage, cable, satellite TV, video game line items? Did you do the math? That's right, we could comfortably sustain our family of six on less than $1000/month if it came to that, and not dramatically impact our standard of living. How do our budgets stack up? Have any tips or suggestions that really made a difference in your budgeted expenses? Ready to cut up that credit card yet?
-Jeremy
Blog: http://mnhomesteader.com/blog/
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